and circumvent Congress which otherwise has the *sole constitutional authority* to do so. Accodring to Politico below Brock's attorneys do not feel this a winning argument however (thank God!). PS: Clyburn was reported by Rand Paul on the Mark Levin radio talk show yesterday to have said something to the effect "we do things around here in Washington outside the Constitution all the time":

***'Something like this will bring calm to the American people,' Clyburn said. | Niko Duffy/POLITICO CloseBy JENNIFER EPSTEIN | 7/27/11 12:14 PM EDT Updated: 7/27/11 10:33 PM EDT Rep. James Clyburn and a group of House Democrats are urging President Barack Obama to invoke the 14th Amendment to raise the debt ceiling if Congress can’t come up with a satisfactory plan before the Tuesday deadline.

Clyburn, the third-ranking House Democrat, said Wednesday that if the president is delivered a bill to raise the debt ceiling for only a short period of time, he should instead veto it and turn to the phrase in the Constitution that says the validity of the U.S. government’s debt “shall not be questioned.”

Continue Reading Text Size- + reset Listen Carney: 14th Amendment 'not an option'Boxer on 14th AmendmentGeithner on invoking the 14th Amendment - May 25th, 2011POLITICO 44“If that’s what lands on his desk, a short-term lifting of the ceiling, the debt ceiling, he should put it on his desk next to an executive order,” Clyburn said at a press conference. “He should sign an executive order invoking the 14th Amendment to this issue.” The Associated Press reported that he was applauded when he suggested the idea at a caucus meeting earlier in the day.

“I believe that something like this will bring calm to the American people and will bring needed stability to our financial markets,” Clyburn added, noting that President Harry Truman did it once during his presidency after Congress was unable to pass a bill to raise the debt ceiling.

Obama and others in his administration have said they will not rely on the 14th Amendment. At a town hall last week, Obama said that he has “talked to my lawyers” and “they are not persuaded that that is a winning argument.”

At his daily briefing Wednesday afternoon, White House press secretary Jay Carney knocked down any suggestion that the president would reconsider.

“Our position hasn’t changed. There are not off-ramps, there’s no way around this, there’s no escape,” Carney said. “You know, having an esoteric constitutional argument won’t reduce the fact that the borrowing authority is due to expire on August 2nd and Congress has the legal authority and only Congress has the legal authority to extend that borrowing authority.”

“The president stood here and told you,” Carney added. “We consulted to see what this was about, but this is not an option.”

But Clyburn and several other liberal Democrats urged the president to reconsider.

“We’re getting down to decision time,” said Rep. John Larson (D-Conn.), the chairman of the Democratic caucus. “We have to have a failsafe mechanism and we believe that failsafe mechanism is the 14th Amendment and the president of the United States.”

Appearing on MSNBC later Wednesday morning, Sen. Barbara Boxer (D-Calif.) suggested that it should be the president’s last resort. “As far as the 14th Amendment is concerned, I urge everybody to get their Constitution and read it. It says the debts of the United States shall not be questioned,” she said.

“If [Republicans] want to make this country a deadbeat nation, this president shouldn’t allow it, none of us should allow it. And I think he should seriously look at whatever options he has.”***

FWIW, the WSJ's analysis here. I am unpersuaded, particularly with regard to the risks to the defense budget. We could eliminate the defense budget 100% and still be fuct. To have it go 50-50 with cutting Baraq's inflated spending is madness. =======If a good political compromise is one that has something for everyone to hate, then last night's bipartisan debt-ceiling deal is a triumph. The bargain is nonetheless better than what seemed achievable in recent days, especially given the revolt of some GOP conservatives that gave the White House and Democrats more political leverage.

***The big picture is that the deal is a victory for the cause of smaller government, arguably the biggest since welfare reform in 1996. Most bipartisan budget deals trade tax increases that are immediate for spending cuts that turn out to be fictional. This one includes no immediate tax increases, despite President Obama's demand as recently as last Monday. The immediate spending cuts are real, if smaller than we'd prefer, and the longer-term cuts could be real if Republicans hold Congress and continue to enforce the deal's spending caps.

The framework (we haven't seen all the details) calls for an initial step of some $900 billion in domestic discretionary cuts over 10 years from the Congressional Budget Office (CBO) baseline puffed up by recent spending. If the cuts hold, this would go some way to erasing the fiscal damage from the Obama-Nancy Pelosi stimulus. This is no small achievement considering that Republicans control neither the Senate nor the White House, and it underscores how much the GOP victory in November has reshaped the U.S. fiscal debate.

No wonder liberals are howling. They have come to believe in the upward spending ratchet, under which all spending increases are permanent. Not any more.

The second phase of the deal is less clear cut, though it also could turn out to shrink Leviathan. Party leaders in both houses of Congress will each appoint three Members to a special committee that will recommend another round of deficit reduction of between $1.2 trillion and $1.5 trillion, also over 10 years. Their mandate is broad, and we're told very little is off the table, but at least seven of the 12 Members would have to agree on a package to force an up-or-down vote in Congress.

If the committee can't agree on enough deficit reduction, then automatic spending cuts would ensue to make up the difference to reach the $1.2 trillion minimum deficit-reduction target. One key point is that the committee's failure to agree would not automatically "trigger" (in Beltway parlance) revenue increases, as the White House was insisting on as recently as this weekend. That would have guaranteed that Democrats would never agree to enough cuts, and Republicans were right to resist.

Instead the automatic cuts would be divided equally between defense and nondefense. So, for example, if the committee agrees to deficit reduction of only $600 billion, then another $300 billion would be cut automatically from defense and domestic accounts (excluding Medicare beneficiaries) to reach at least $1.2 trillion.

This trigger is intended to be an incentive for committee Members of both parties to agree on more cuts, but defense cuts of this magnitude would do far more harm to national security than they would to domestic accounts that have been fattened by stimulus. This is the worst part of the deal, and Mr. Obama's political goal will be to press Republicans to choose between tax increases and destructive defense cuts. The GOP will have to fight back and make the choice between domestic cuts and harm to our troops fighting multiple wars.

While the "trigger" includes no revenue increases, the committee itself could agree to raise taxes to meet the $1.2 trillion deficit reduction target. This means GOP leaders Mitch McConnell and John Boehner have to be especially careful in their choice of appointees. No one from the Senate Gang of Six, who proposed tax increases, need apply. The GOP choices should start with Arizona Senator Jon Kyl and House Budget Chairman Paul Ryan, adding four others who will follow their lead.

One reason to think tax increases are unlikely, however, is that the 12-Member committee will operate from CBO's baseline that assumes that the Bush tax rates expire in 2013. CBO assumes that taxes will rise by $3.5 trillion over the next decade, including huge increases for middle-class earners. Since any elimination of those tax increases would increase the deficit under CBO's math, the strong incentive for the Members will be to avoid the tax issue. This increases the political incentive for deficit reduction to come from spending cuts.

Mr. Obama's biggest gain in the deal is that he gets his highest priority of not having to repeat this debt-limit fight again before the 2012 election. The deal stipulates that the debt ceiling will rise automatically by $900 billion this year, and at least $1.2 trillion next year, unless two-thirds of Congress disapproves it. Congress will not do so.

Given how much the current debate has damaged the public perception of Mr. Obama's leadership, this will be a relief at the White House. This is part of the negotiating price that Mr. Boehner had to pay because of the back-bench revolt that showed he couldn't guarantee a debt-limit increase with only GOP votes. This gave Democrats more leverage.

***The same supposedly conservative Republicans and their talk radio minders may denounce this deal as a sellout, but we'll be charitable and assume they've climbed so far out on the political ledge they don't know how to climb back without admitting they were wrong. They're right that this deal doesn't "solve" our fiscal crisis, but no such deal is possible as long as liberals run the Senate and White House.

The debt ceiling is a political hostage the GOP could never afford to shoot, and this deal is about the best Republicans could have hoped for given that the limit had to be raised. The Jim DeMint-Michele Bachmann-Sean Hannity alternative of refusing to raise the debt limit without a balanced-budget amendment and betting that Mr. Obama would get all the blame vanishes upon contact with any thought. Sooner or later the GOP had to give up the hostage.

The tea partiers pride themselves on adhering to the Constitution, which was intended to make political change difficult. Yet in this deal they've forced both parties to make the biggest spending cuts in 15 years, with more cuts likely next year. The U.S. is engaged in an epic debate over the size and scope of government that will play out over several years, and the most important battle comes in the election of 2012.

Tea partiers will do more for their cause by applauding this victory and working toward the next, rather than diminishing what they've accomplished because it didn't solve every fiscal problem in one impossible swoop.

(I think I have my numbers right, but unverified numbers are flying fast and loose at the moment.)

"Default" and "Downgrade" are distinct issues, though certainly defaulting would lead to downgrading.

The "deal" is nowhere near the $4T minimum that the credit rating agencies stated that they wanted for them to not downgrade the US.

Even under the rosy scenario numbers of the deal,(e.g. the economy is not sliding into another recession, which may well be the case) the national debt will increase 50% (by $7T).

Should the deal proffered by the proposed committee not pass, the burden of the cuts falls disproportionately, and greatly so, upon defense. The Republicans will likely have to vote between raising taxes-- with the attendant consequences for the economy-- or gutting defense.

This just came into my mailbox after I made my previous post. Sadly, it makes a lot of sense to me.

Not Playing The Fool

Posted by Erick Erickson (Profile)Monday, August 1st at 4:46AM EDT

There are a lot of Republicans tonight willing to play the fool for the GOP in thisdebt ceiling plan. They say, for example, that there will be no tax increases fromthis super committee. Never mind that the Democrats are saying otherwise.

I can prove to you right now that there will be tax increases.

The Congressional Budget Office (CBO) expects the Bush tax cuts to expire. So allthe commission has to do is two things: extend middle class Bush tax cuts and enacta permanent alternative minimum tax (AMT) patch. Those two together would look likean increase to the deficit in CBO scoring. So then the commission can start out ofthe gate with the ability to create several trillion dollars in new tax hikes toequal out to the cuts — cuts that will happen even without the commission mostlikely. And where will those cuts come from? Those making $250,000.00 or more, ofcourse. And probably the Gang of 6′s ideas to eliminate most deductions to incometaxes without revenue neutral rate reductions and the Gang of 6′s pièce derésistance — raising capital gains taxes from 15% to 28%.

Have people not been paying attention? In every single address the President hasgiven on the debt ceiling, he has insisted on new tax revenue. John Boehner even put$800 billion on the table, so it is already there.

The House and Senate GOP leadership may have convinced themselves that they havesnookered the Democrats, but even little ole me, a non-budget genius, can drive atruck through their argument. And their best response probably comes from Ryan Ellisof Americans for Tax Reform. That counter argument is best summed up as but . . .but . . . but . . . the House Leadership says so. And if puppies were unicorns, we’dall live in a fantasy land.

Apparently, young lefty Ezra Klein who thinks no one pays attention to theconstitution because, dude, it’s so old, is brighter than Ryan Ellis at ATR. Kleinwrites, “Boehner is misleading his members to make them think taxes are impossibleunder this deal. The Joint Committee could close loopholes and cap tax expenditures.It could impose a value-added tax, or even a tax on carbon.”

There will be tax increases. The Deficit Commission will have at least one weakkneed Republican and the commission will only be as strong as its weakest link. TheBush tax cuts will also absolutely expire and not be renewed.

The alternative for the GOP would be seeing massive defense cuts and being blamedfor senior citizens seeing their medicare cut. “But,” House Republican leadersexclaim, “the cuts would not be to beneficiaries.”

True, the cuts would be punishing doctors who will respond by denying access tomedicare patients.

The Democrats are happy to force through taxes in the committee and then, when theGOP opposes them, claim the GOP would rather hurt our soldiers and seniors thanraise taxes on “fat cat millionaires.”

And if we’ve learned nothing else these past few weeks, the GOP fears more thananything else what the Democrats say about them. Don’t believe me on taxes? then askGOP leadership why they haven’t put in a clear statement prohibiting them or, evenbetter, why there is no prohibition on decoupling the middle class Bush tax cutsfrom the upper income Bush taxes cuts.Last week in the Washington Post, the GOPLeadership in Congress planted a hit job about me. How do I know they planted it? Ifnot obvious from the story itself, it was from the conversation between the reporterand those she talked to.

One of the “attacks” on me was that I was too predictable. Yes, it is true. I ampredictable conservative and am not willing to sell out my conservatism for theteam. I hate to break it to you.

I was sorely tempted to do so now with this deal as our guys are running scared andare convinced the August 2nd deadline is real. But the GOP is in denial, excited byleft wing hyperbole against the deal, and unable to see what is on the horizon.

There are stories in the press that (A) the White House and Treasury Departmentwon’t give the GOP information about how much money the U.S. has on hand and (B)that both Democrat and Republican leaders are mad as hell that the markets haven’tcrashed so they could scare conservatives into taking a deal.

It is true — Republican and Democrat leaders are upset the market has not crashed.

Now, having run out the clock and admitted that Harry Reid and Mitch McConnell wroteJohn Boehner’s plan (that was in the Washington Post), they now want to go back to agrand compromise that yet again includes a super committee of Congress that can passtax increases with no way to block the committee.

And if they do somehow stop the committee or kill its idea, then our soldiers in thefield would see punitive cuts to the defense budget, even more so than seniors whowill see cuts to medicare. In other words, cuts so painful to right and left thatboth will have to take the committee recommendation.

“But it’s okay,” they tell us. “The committee is structured in such a way that theycan’t get tax increases.” Having considered the matter carefully — this is utterbullcrap.

So here’s what will happen. The people who are predictably willing to fold to saveface with the GOP will ridicule you, me, and the tea party. And in November, whenthe chickens come home to roost and what I predict comes true yet again, they’llpretend yet again that they were with us the whole time.

But taxes will go up and the Democrats will have won, left wing hysterianotwithstanding.

Agreed. Thank God for the tea party without which this country would have no chance.

The Democrat party has succeeded in nearly bankrupting us. The Republicans trying to keep up with them in buying votes (I admit I was not against this strategy in the past) have contributed to it under Bush 2.

I am not sure we can correct this without some tax hikes however. The numbers are so astoungingly bad I just don't see how we can do this otherwise unless we want to see the breadlines and people begging in the streets again.

Washington has to come clean and tell us forget about retirement till 70 and just wait till the seniors see what real HMO medicine is like. I've seen it and know they will not like what they see. It will be worse under the private sector with companies like Humana who are brutally cruel when it comes to scimping on providing care.

As CCP implied, it is too bad the big issues are not being addressed, merely postponed, like Medicare and Social Security.

All the discretionary money discussed this round is minimal in comparison.

Merely cutting what you pay doctors for Medicare is not a solution. More doctors will simply drop out;better to raise the age to 67 or ....

I long for the old days of compromise. We need a joint committee finding a solution to cutting entitlements. It's not a Democrat or Republican issue; it's an American issue.

As a side note, cut the defense budget. I am tired of spending billions upon billions of dollars when they are all added up on Iraq, Afghanistan and now Libya. Who is next? We don't even get a thank you. Rather, we are being told to leave. Quit being the world's policeman and imposing our opinion/beliefs. Save the lives and money and spend it on Americans in America.

I understand your point. But we are almost being kicked out of Iraq (who is to say what happens after we leave), Afghanistan is and has been a quagmire for hundreds of years (we aren't going to change it; ask the Russians) and Libya, et al, while I feel sorry for the freedom fighters, it's not our fight. Nor is upheavals in Africa, et al our fight. Save American lives, save the money and spend it on America. I'm not sure our efforts one way or the other make a difference, oddly we seem to create even more enemies, nor do I think if most of the Middle East fell under Sharia Law (isn't it already?) that it would directly affect America. If you don't like it, don't go there. Let them rot. I worry far more about China both economically and militarily than "global jihad". I worry about America's future, not the Middle East except we need their oil.

First this: "Returning to the subject of the debt farce deal, a key question: Does the "Read our lips, no new taxes in this deal" apply to the expiration of the Bush Tax Rates?"

Of course the 'Bush tax cuts already expired. These extensions therefore are the Obama rates! In spite of me being told repeatedly by a liberal that expiration of tax cuts (from a previous decade) is NOT an increase of any kind, I can answer only for my own opinion of how Republicans will be judged - YES!--------------Here is Sen. Marco Rubio (R-FL) addressing the partisanship of the moment and the need for a budget and putting controls on spending: http://www.youtube.com/watch?v=_68GjR6V6zI

"Compromise that is not a solution is a waste of time. If my house was on fire, I can't compromise about which part of the house I'm going to save. You save the whole house - or it will all burn down. We either save this country or we do not. And to save it, we must seek solutions."

Rand Paul: The deal that is pending before us now," get this, "Adds at least $7 trillion to our debt over the next 10 years." Not $2.4 trillion; $7 trillion. "The deal purports to 'cut' $2.1 trillion, but the 'cut' is from a baseline that adds $10 trillion to the debt." (Doug: How can you have a baseline - where things should be - that adds trillions to the debt. The 'baseline' should add ZERO to the debt and the elected officials can start from there!)

Rush L: As you well know, because we've been explaining this in easily understandable detail all week. I love the illustration. We could prepare a budget that is a freeze next year that doesn't spend a dime more than this year, and it would be scored as a nine and a half trillion-dollar cut because of the baseline, because of how the budget is expected to grow. This deal, even if all targets are met and the Super Committee wields its mandate - results in a BEST case scenario of still adding more than $7 trillion more in debt over the next 10 years. That is sickening.-------------------I say everybody take a deep breath, enjoy your August, understand that we are still taking on $4 billion dollars a day of new debt accumulating with interest to eternity, and come back angry, focused, and committed to do whatever each of us can do to try to make a difference and solve this. The debt ceiling wasn't really the big opportunity to change course although both sides pretended for a while that it was. Even the Ryan plan involves taking on significant new debt for about as far as the eye can see. These things are settled in elections and we have a short time to put together a team, an agenda, and a message. The problem in past elections is that they simply have pitted 'our' big spenders against their big spenders. This time maybe we can offer a combination of real spending restraint and pro-growth economics up against their same old stagnation/class-envy agenda of tax more, regulate more, and spend without limits, and we can try to win!

BTW I often struggle to concisely explain BLB. I like the "If you freeze spending, that would be called a $9.5T cut" approach. Not bad!

BTW here this from Senator Rand Paul. Some important details to be noted in here e.g. how it is now easier for Baraq to raise the debt ceiling.========

Open Letter: Why I Oppose the Debt Ceiling CompromisePublished on 01 August 2011 by admin in Press Releases0WASHINGTON, D.C. – Today Sen. Rand Paul issued an open letter on the subject of thedebt ceiling compromise facing the Senate. Below is that letter.

To paraphrase Jim DeMint: When you’re speeding toward the edge of a cliff, you don’tset the cruise control. You stop the car.

The current deal to raise the debt ceiling doesn’t stop us from going over thefiscal cliff. At best, it slows us from going over it at 80 mph to going over it at60 mph.

This plan never balances. The President called for a “balanced approach.” But theAmerican people are calling for a balanced budget.

This deal does nothing to fix the overreaches of both parties over the past fewyears: Obamacare, TARP, trillion-dollar wars, runaway entitlement spending. They areall cemented into place with this deal, and their legacy will be trillions ofdollars in new debt.

The deal that is pending before us now:

· Adds at least $7 trillion to our debt over the next 10 years. The deal purports to“cut” $2.5 trillion, but the “cut” is from a baseline that adds $10 trillion to thedebt. This deal, even if all targets are met and the Super Committee wields itsmandate – the BEST case scenario is still $7 trillion more in debt over the next 10years. That is sickening.

· Never, ever balances.

· The Super Committee’s mandate is to add $7 trillion in new debt. Let’s be clear:$2.5 trillion in reductions off a nearly $10 trillion,10-year debt is still $7trillion in debt. The Super Committee limits the Constitutional check of thefilibuster by expediting passage of bills with a simple majority. The SuperCommittee is not precluded from any issue therefore the filibuster could be renderedmost. In addition, the plan harms the possible passage of a Balanced BudgetAmendment. Since the goal is never to balance, having the BBA as a “trigger” ensuresthat the Committee will simply report its $7 trillion in new debt and never move toa BBA vote.

· Cuts too slowly. Even if you believe cutting $2.5 trillion out of $10 trillion isa good compromise, surely we can start cutting quickly, say $200 billion-$300billion per year, right? Wrong. This plan so badly backloads the alleged savingsthat the cuts are simply meaningless. Why do we believe that the goal of $2.5trillion over 10 years (that’s an average of $250 billion per year) will EVER be metif the first two years cuts are $20 billion and $50 billion. There is simply no pathin this bill even to the meager savings they are alleging will take place.

Buried in the details of this bill there also appears to be the automatic Debtincrease as proposed a few weeks ago. Second half of the debt ceiling is increasedby President automatically and can only be stopped by two-thirds of Congress. Thisshifts the Constitutional check on borrowing from Congress to the President andmakes it easier to raise the debt ceiling. This would cede debt ceiling to thePresident, and none of the triggers in this deal include withholding the secondlimit increase.

Debt agencies have clearly stated the type of so-called cuts envisioned in this planresult in our AAA bond rating being downgraded. Ironically then, the only way toavoid our debt from downgrading and the resulting economic problems that stem fromthat is for this bill or the resulting Super Committee to fail, so that a BalancedBudget Amendment can save our country.

This plan does not solve our problem. Not even close. I cannot abide the destructionof our economy, therefore I vigorously oppose this deal and I urge my colleagues andthe American people to do the same.

Rand Paul: "This plan never balances. The President called for a “balanced approach. But the American people are calling for a balanced budget."

Yes and no. This bipartisan farce passed easily at the end because the people really are not calling for an immediate balance to the budget which would effectively be a 43% across the board cut in spending.

Also, most of these 'cuts' are unnamed, hence the power of the 'super'committee.

So we passed the most pretend cuts that we can with this cast of characters. The next step is to grow the economy and keep the President on the defensive - too busy to propose or sell another round of faux-stimuli.

Again only the tea party has any legs. And the left demonizes them to preserve their power. And the center right likes their power too and is trying to keep up with the vote buying of the left in trying to appear "compromising" and "reasonable".

The country's debt situation in real terms actually got worse this week under the continuing anchor of Obamanomics. Debt is measured in dollars but most judged as a percentage of income. Because of sudden new borrowings and the economic growth downgrades and the past economic results downgrades, total debt now exceeds total GDP of the US economy for the first time since 1947 according to US Treasury figures:

Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country's spending commitments reached a breaking point and it threatened to default on its debt.

The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium.

Public debt subject to the official debt limit -- a slightly tighter definition -- was $14.53 trillion as of the end of Tuesday, rising from the previous official cap of $14.29 trillion a day earlier.

Treasury had used extraordinary measures to hold under the $14.29 trillion cap since reaching it on May 16, while politicians battled over it and over addressing the country's bloating deficit.

The official limit was hiked $400 billion on Tuesday and will be increased in stages over the next 18 months.

The last time US debt topped the size of its annual economy was in 1947 just after World War II.

Many House and Senate conservatives are reviving their battle against federal regulations, claiming that the president hasn't stopped issuing job-killing rules during the debt ceiling fight. "While Washington and Americans have been focused on the debt ceiling, the Obama administration has continued to roll out more crushing red tape," said a spokesperson for Wyoming Republican Sen. John Barrasso, who's been championing the regulation fight.

At Tuesday's GOP Senate caucus lunch, the lawmakers said that they will renew their efforts, supported by business groups like the U.S. Chamber of Commerce. In a memo Barasso handed out to the lawmakers, he claimed that the administration in July only has put in $9.5 billion in new regulatory costs by proposing 229 new rules and finalizing 379 rules. Among those he cited were EPA, healthcare reform, and financial regulatory reform rules.

Well the champion of women's rights Brock at least got us all to chip in for birth control.So what if we go bankrupt.

***Jewish World Review August 3, 2011 / 3 Menachem-Av, 5771

Timid establishment chooses incrementalism over saving the future

By Tony Blankley

http://www.JewishWorldReview.com | The debt deal, if it sticks, is a triumph for the bipartisan, status quo-clinging Washington establishment. Here is a prediction: Between now and January 2013, total actual spending cuts will be minimal. That will result from the following: (1) The $900 billion deficit reduction is almost all back-loaded to the years beyond 2012. (2) The select committee created by the budget deal will fail to pass a "second tranche" deficit-cut package of an additional $1.5 trillion. (3) The "trigger" will be pulled that will identify an additional $1.2 trillion. (4) The pulled trigger won't require any more deficit reductions to go into effect until 2013, when a new Congress and either a new president or a re-elected President Obama will be able to re-decide (or repeal) all these decisions. That president will also have to decide what to do with the expiring Bush tax cuts, which if extended would be scored to increase deficit by $3.5 trillion over ten years. (5) The debt ceiling will not need to be raised until 2013.

It is true that the Tea Party has "won" within the context of what constitutes a political win in Washington. But have they accomplished enough to change our future? No, by this deal, they have not.

To have a chance at actually changing our future, Washington would have to risk shocking and unpredictable change that might rock, temporarily, the financial prosperity of the nation. The establishment is not ready for that. To wit: Whether to risk radical change now or not is the measure of whether to support the deal.

Thus, Washington politicians and politically alert citizens across the country can be broadly divided into those who fear losing the status quo and those who fear losing the future. But it is less a matter of ideology (for both left and right) and more a matter of urgency.

It's not that pro status quo Republicans, for instance, don't worry about the state and debt getting ever bigger and more intrusive - they do - just as left wing Democratic establishment politicians worry about income disparities and insufficient social welfare programs.

What divides the GOP establishment types from the Tea Party people on the right is that the GOP establishment types don't feel sufficiently urgent about intrusive statism and unbearable debt to risk action now that would radically change the status quo governing process, policies and politics. Similarly, the Democratic establishment is not prepared to fight now for a radical change to the left.

The establishment explains — rather condescendingly — to the "unsophisticated" tea party and similar people that political change under our constitutional system is incremental. Take what you can get and come back for a little more next season. That is an argument about American political history that has usually been right, but not always.

When the insistent demands of the near future require more than incremental change, the American political process can become quite radical. For example, the demands of the common man against the aristocratic federalist policies from the 1790s to the early 1800s forced radical change, ending federalists and bringing in first Jeffersonianism (in the revolution of 1800) and Jacksonianism in the 1830s. The old order was overthrown by democratic radicalism. Most conspicuously, the urgent demands of abolition and secession brought on the shocking radical solution of the Civil War in 1861.

The vast immigration to post-Civil War America brought on radical progressivism, which caused the suppression of some of the democratic power of the new immigrants and closed the immigration door to non-Northern Europeans almost entirely in 1924. Obviously, the shock of the Great Depression brought on radical statism in Washington — again overthrowing many status quo interests.

So, who's the fool: The Tea party people, who say we must do much more now to avert the coming debt and statism disaster, or the status quo establishment who say don't rock the fiscal, debt-ceiling boat — we'll get to fixing the future in...the future?

I've been a Reagan conservative incrementalist all my political life. But the near and ominous debt and statism future is radicalizing me quickly. We must do much more, much faster than this deal offers if we are to save our future. The establishment needs to start emotionally de-investing in a fast dying status quo and prepare to embrace real change.

America will lose its triple-A Treasury rating not because a rating agency says so (and despite a debt deal) but because the anticipated federal debt to gross domestic product ratio — and the $60 trillion of unfunded entitlements that is driving that ratio— can be seen by every bond buyer on the planet.

As if that weren't enough, I saw a WSJ editorial today which explained that the purported Medicare cuts that will be paired with the $500B cuts of the US military in the event that the SuperCommittee does not come up with something passed by Congress and signed by Baraq will be in purported payments to PROVIDERS, NOT BENEFITS. i.e. the law of supply and demand will be repealed and the health care system will be commanded to offer the same level of service for less money. This is regularly done, AND UNDONE already. (Perhaps our docs here can help flesh this out?) Bottom line:

a) BO gets past the 2012 electionb) the Bush tax rates will expire (as best as I can tell) but this will not be called a tax increasec) Medicare will not be cutd) the Reps will have to allow additional tax increases or allow the military to be decimated

On Thursday, in honor of Barack Obama’s 50th birthday, the Dow dropped ten points for every year he has walked among us. It was the ninth largest drop in history. We should be relieved he wasn’t turning eighty.

The markets are apparently concerned that the entire global economy may be “stalling.” You don’t say? Observant fellows, these market chappies.

And yet, in a certain sense, these are still the good times. At the end of the week, U.S. Treasury yields plunged to Eisenhower-era rates. America, explained Ethan Harris of Bank of America Merrill Lynch, “still gets the safe haven money.” That’s to say, as crazy as Washington is, Europe is perceived to be crazier. In confirmation of the point, over in Italy, which is (believe it or not) a G7 economy, police raided Moody’s and Standard & Poor’s over allegations that all the meanie things that the rating agencies have been saying about the Italian economy were having an impact on Italian stock prices. Apparently that’s a crime in Italy. They’re not yet shooting the messenger. But they are dragging him through the streets in chains pour encourager les autres. Good luck with that.

But I wonder if “the safe haven money” is quite as safe as its investors assume. Under the “historic” “resolution” of the debt crisis (and don’t those very words “debt crisis” already feel so last week?), America will be cutting federal spending by $900 billion over ten years. “Cutting federal spending by $900 billion over ten years” is Washington-speak for increasing federal spending by $7 trillion over ten years. And, as they’d originally planned to increase it by eight trillion, that counts as a cut. If they’d planned to increase it by $20 trillion and then settled for merely $15 trillion, they could have saved five trillion. See how easy this is?

As part of this historic “cut,” we’ve now raised the “debt ceiling” — or, more accurately, lowered the debt abyss. Do you ever discuss the debt with your neighbor? Do you think he has any serious intention to repay the 15 trillion racked up in his and your name? Does your congressman? Does your senator? Look into their eyes. You can see the answer. And, if none of these parties seem inclined to pay down the debt now, what are the chances they’ll feel like doing so by 2020 when, under these historic “cuts,” it’s up to 23-25 trillion?

Like America’s political class, I have also been thinking about America circa 2020. Indeed, I’ve written a book on the subject. My prognosis is not as rosy as the Boehner-Obama deal, as attentive readers might just be able to deduce from the subtle clues in the title: After America: Get Ready For Armageddon. Oh, don’t worry, I’m not one of these “declinists.” I’m way beyond that, and in the express lane to total societal collapse. The fecklessness of Washington is an existential threat not only to the solvency of the republic but to the entire global order. If Ireland goes under, it’s lights out on Galway Bay. When America goes under, it drags the rest of the developed world down with it. When I go around the country saying stuff like this, a lot of folks agree. Somewhere or other, they’ve a vague memory of having seen a newspaper story accompanied by a Congressional Budget Office graph with the line disappearing off the top of the page and running up the wall and into the rafters circa mid-century. So they usually say, “Well, fortunately I won’t live to see it.” And I always reply that, unless you’re a centenarian with priority boarding for the ObamaCare death panel, you will live to see it. Forget about mid-century. We’ve got until mid-decade to turn this thing around.

Otherwise, by 2020 just the interest payments on the debt will be larger than the U.S. military budget. That’s not paying down the debt, but merely staying current on the servicing — like when you get your MasterCard statement and you can’t afford to pay off any of what you borrowed but you can just about cover the monthly interest charge. Except in this case the interest charge for U.S. taxpayers will be greater than the military budgets of China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey, and Israel combined.

When interest payments consume about 20 percent of federal revenues, that means a fifth of your taxes are entirely wasted. Pious celebrities often simper that they’d be willing to pay more in taxes for better government services. But a fifth of what you pay won’t be going to government services at all, unless by “government services” you mean the People’s Liberation Army of China, which will be entirely funded by U.S. taxpayers by about 2015. When the Visigoths laid siege to Rome in 408, the imperial Senate hastily bought off the barbarian king Alaric with 5,000 pounds of gold and 30,000 pounds of silver. But they didn’t budget for Roman taxpayers picking up the tab for the entire Visigoth military as a permanent feature of life.

And even those numbers pre-suppose interest rates will remain at their present historic low. Last week, the firm of Macroeconomic Advisors, one of the Obama administration’s favorite economic analysts, predicted that interest rates on ten-year U.S. Treasury notes would be just shy of nine percent by 2021. If that number is right, there are two possibilities: The Chinese will be able to quintuple the size of their armed forces and stick us with the tab. Or we’ll be living in a Mad Max theme park. I’d bet on the latter myself.

Did you know there’s a U.S. Bureau of the Public Debt? Hey, why not? There’s a bureaucracy for everything else. I’m sure somewhere or other there’s a CBO graph showing that by 2050 all federal revenues will be going either to the Chinese Politburo or to the lavish pension plans of retired officials of the Bureau of the Public Debt. At any rate, the BPD is headquartered in Parkersburg, West Virginia, and it’s easy to find because it’s the only building in the state other than the Klan lodge not named after Robert C. Byrd. The Bureau uses as its motto the words of Alexander Hamilton: “The United States debt, foreign and domestic, was the price of liberty.”

But in the early 21st century foreign and domestic debt is a threat to liberty. As the Brokest Nation in History drowns in its profligacy, its commissars will grow ever more rapacious and desperate. If you think Obama’s dreary attempt to blame America’s woes on corporate-jet owners is unbecoming to the chief of state, wait till he’s reduced to complaining about two-car families. By the way, if you’re reading this out on the runway at O’Hare, what’s the difference between a corporate jet landing and Obama flying in? With Air Force One, even when they switch the engines off, all you can hear is the whining.

No author writes a dystopian apocalyptic doomsday book because he wants it to happen: Apart from anything else, the collapse of the banking system makes it hard to cash the royalty check. You write a doomsday book in hopes you can stop it happening. But time is running short. If you think we’ve got until 2050 or 2025, you’re part of the problem.

"But with respect to future debt; would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19 years." --Thomas Jefferson, letter to James Madison, 1789

Moody’s reaffirmed its AAA-rating on US government debt last week, while Standard & Poor’s lowered it a notch to AA+. The US now has a split rating from the largest agencies. The bond market, even though it is not open right now, was well aware that a downgrade was possible, but will still lend 10-year money to the US government under 2.6%. In fact, after the US was put on credit watch by S&P in mid-July, US yields fell, they did not rise.

Ten-year interest rates, on Friday, were lower in the US than in Canada, Australia, United Kingdom, France, New Zealand, or Norway – all AAA-rated countries. In other words, S&P is leading the markets here, not following, as it normally does. For example, it did not lower its AAA rating on low-income, low credit score, no-doc, no-down-payment loans to homebuyers until the market crashed and became absolutely illiquid.

This downgrade of the US was based, not on an ability to pay bond-holders, but in consideration of the political turmoil the US has just gone through (over the debt deal) and the potential for more political turmoil in the months and years ahead. None of this is new to the market and the US is still the world’s reserve currency, which means actual default is virtually impossible.

The Federal Reserve has said that the downgrade by S&P has absolutely no impact for risk-based capital ratios. The Fed will still apply a 0% risk-weighted capital requirement on Treasury debt. Some investors (funds, plans, or other investment vehicles) could be forced to alter their portfolios because of investment guidelines. However, most investment committees knew this downgrade could happen and also have the flexibility to change these guidelines relatively easily. In other words, forced selling (or buying) of Treasury, or other, types of debt will likely be benign. S&P left the short-term debt rating at A-1+, its highest, which means money market funds will not be affected. We do not look for any kind of major market disturbance.

The equity markets had a rough week and could still be jittery on Sunday night and Monday morning. Short-sellers will likely try to take advantage of this event. However, the S&P downgrade alters nothing about the economy or corporate profitability in the short, medium or even long- term. We still hold to our comments from last week that the markets are over-reacting to fears about the economy, the debt deal, or European financial issues. (Link)

In the end, while we agree with S&P’s sentiment about the direction of US spending patterns, we do not agree with the S&P downgrade. We believe that S&P is entirely too pessimistic about the ability of the US to pay its debts and solve its problems. History shows that this country has found a way to alter course before problems became a full-blown crisis. In fact, the US economy was in much worse shape during the late 1970s and early 1980s. Elections of the early 1980s changed the country’s course then, and a boom of unprecedented magnitude ensued.

If this move by S&P helps the US get more serious about cutting spending, then it will have been a very positive development. If it influences the political environment by pushing the US to a more conservative set of fiscal values it will be even more positive than that. There is a titanic battle of economic and political philosophy taking place in the US today. S&P wants to be a player in this battle, but in the end it will have a relatively minor role.

Whatever one thinks of the credit-rating agencies—and we aren't admirers—it serves no good purpose to shoot the fiscal messengers. Friday's downgrade by Standard & Poor's of U.S. long-term debt to AA+ from AAA will be the first of many such humiliations if Washington doesn't change its economic and fiscal policies.

Investors and markets—not any single company's rating—are the ultimate judge of a nation's creditworthiness. And after their performance in fanning the credit and mortgage-security mania of the last decade, S&P, Moody's and Fitch should hardly be seen as peerless oracles.

Their views are best understood as financial opinions, like newspaper editorials, and they're only considered more important because U.S. government agencies have required purchasers of securities to use their ratings. We've fought to break that protected oligopoly, even as liberals in the Senate led by Minnesota's Al Franken have tried to preserve it. Federal bank regulators have been on Mr. Franken's side in this fight, so they can blame themselves in part for S&P's continued prominence.

***Yet is there anything that S&P said on Friday that everyone else doesn't already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend.

View Full Image

Getty Images .This is not news.

In that context, the Obama Administration's attempt to discredit S&P only makes the U.S. look worse—like the Europeans who also want to blame the raters for noticing the obvious. Treasury officials and chief White House economic adviser Gene Sperling denounced S&P for relying on a Congressional Budget Office scenario that overestimated the U.S. discretionary spending baseline by $300 billion through 2015 and $2 trillion through 2021.

But even adjusting for that $2 trillion would only reduce U.S. publicly held debt to 85% or so of GDP—still dangerously high. And that assumes that recently agreed upon spending caps are sustained over a decade, something which rarely happens.

We think the larger problem with S&P, Moody's and Fitch is that they make no distinction over how a nation balances its books—whether through tax increases or spending reductions. Like the International Monetary Fund, the raters care only about balance.

This takes too little account of the need for faster economic growth, which is the only real path out of a debt crisis. Britain's government has earned rater approval for its fiscal consolidation, but its increases in VAT and income tax rates are hurting its tepid recovery. Letting the credit raters dictate tax increases is the road to an austerity trap.

The real reason for White House fury at S&P is that it realizes how symbolically damaging this downgrade is to President Obama's economic record. Democrats can rail all they want about the tea party, but Republicans have controlled the House for a mere seven months. The entire GOP emphasis in those seven months—backed by the tea party—has been on reversing the historic spending damage of Mr. Obama's first two years.

The Bush Presidency and previous GOP Congresses contributed to the current problem by not insisting on domestic cuts to finance the cost of war, and by adding the prescription drug benefit without reforming Medicare. But as recently as 2008 spending was still only 20.7%, and debt held by the public was only 40.3%, of GDP.

In the name of saving the economy from panic, the White House and the Pelosi Congress then blew out the American government balance sheet. They compounded the problem of excessive private debt by adding unsustainable public debt.

They boosted federal spending to 25% of GDP in 2009, 23.8% in 2010 (as TARP repayments provided a temporary reduction in overall spending), and back nearly to 25% this fiscal year. Meanwhile, debt to GDP climbed to 53.5% in 2009, 62.2% in 2010, and is estimated to hit 72% this year—and to keep rising. These are all figures from Mr. Obama's own budget office.

View Full Image...Rather than change direction this year, Mr. Obama's main political focus has been to preserve those spending levels by raising taxes. His initial budget in February for fiscal 2012 proposed higher spending. He then resisted the modest spending cuts that the GOP proposed for the rest of fiscal 2011.

He responded to Paul Ryan's proposal to reform Medicare and Medicaid by calling it un-American and unworthy of debate. In the most recent budget talks, he would only consider small entitlement reforms (cuts in payments to providers) if Republicans agreed to raise taxes. He has refused even to discuss ObamaCare or serious reforms in Medicare and Social Security. Meanwhile, federal payments to individuals continue to grow as a share of all spending, as the nearby chart shows.

This is how you become the Downgrade President.

***Despite S&P's opinion, there is no chance that America will default on its debts. The real importance of the downgrade will depend on the political reaction it inspires.

If the response is denial and blaming the credit raters, then the U.S. will continue on its current road to more downgrades and eventually to Greece. What has already become a half-decade of lost growth will turn into a lost decade or more.

If the response is to escape the debt trap by the stealth route of inflation—a path now advocated by many of the same economists who promoted the failed spending stimulus of 2009—then the U.S. could spur a dollar crisis and jeopardize its reserve currency status.

The better answer—the only road back to fiscal sanity and AAA status—is to reverse the economic policies of the late Bush and Obama years. The financial crisis followed by the Keynesian and statist revival of the last four years have brought the U.S. to this downgrade and will lead to inevitable decline. The only solution is to return to the classical, pro-growth economic ideas that have revived America at other moments of crisis.

How did we get to this point? I never dreamed of expecting tax payers to pay for students food before.

From Kayla Neff who was receiving food stamps to buy food for her and her father:

"Students should be focusing on their education, not whether or not they'll be able to eat dinner or whether they can manage to find a job and balance it on top of their studies," Neff said in a Friday email interview from Mount Pleasant."

So how did we get to her next logical conclusion that her food should be paid for by taxpayers? Who the heck is she and why should others pay for her Mcdonald's. What is this? How about a loan? Why is the treasury a free bank in the minds of these people. They should have this they should have that. There is no end to this.

****Last Updated: August 08. 2011 6:22PM 30,000 college students kicked out of food aid program in MichiganState's new eligibility rules to save $75M; more students got aid than thoughtPaul Egan/ Detroit News Lansing BureauLansing — Michigan has removed about 30,000 college students from its food stamp program — close to double the initial estimate — saving about $75 million a year, says Human Services Director Maura Corrigan.

Federal rules don't allow most college students to collect food stamps, but Michigan had created its own rules that made nearly all students eligible, said Brian Rooney, Corrigan's deputy director. As a result, the number of Michigan college students on this form of welfare made the state a national leader. For example, Michigan had 10 times the number of students on food stamps as either Illinois or California, Rooney said.

Cutting off the students is part of what Corrigan says is an effort to change the culture of the state's welfare department and slash tens of millions of dollars of waste, fraud and abuse.

"Maybe (students) could go get a part-time job — that's what I did," said Corrigan, a former justice of the Michigan Supreme Court who attended Detroit's Marygrove College and University of Detroit Mercy School of Law.

"We want to encourage people to be self-sufficient, not to be dependent on the government," she said in an interview with The Detroit News.

But critics say state funding has shrunk and tuition has skyrocketed since Corrigan attended college in the late '60s and early '70s. They cite Michigan's still-battered economy and say the suffering the cuts will create won't be apparent until after cash-strapped students return to campuses this fall.

Corrigan, appointed by Republican Gov. Rick Snyder in January to head the $6.9 billion Department of Human Services, has also ordered administrators to start looking at applicants' assets, not just their income. That move follows an uproar after it was revealed Leroy Fick of Auburn remained eligible for food stamps and continued using them after he won $2 million in the state lottery TV show "Make Me Rich!" in June 2010.

If cutting millionaires off food stamps is a no-brainer, some say cutting off most students is less clear cut.

Kayla Neff, a 19-year-old Spanish and computer science student at Central Michigan University who qualified for food stamps in September, said it's tough to find a job in Michigan, particularly for students with little experience.

Neff said she and her father share about $150 a month in grocery money from the program, which "made all the difference in the world," but her eligibility is now under review.

"Students should be focusing on their education, not whether or not they'll be able to eat dinner or whether they can manage to find a job and balance it on top of their studies," Neff said in a Friday email interview from Mount Pleasant.

CMU was singled out by Corrigan as having publicized students' eligibility for food stamps on the university's website. University spokesman Steven Smith said Friday he wanted to research the issue, but "I am confident no official CMU site would promote this kind of activity."

The number of students taken off food stamps was close to double the estimate of 10,000 to 18,000 before the policy change was implemented in April.

Under the federally funded program, college students generally aren't eligible, Rooney said. But Michigan had created an exception for those participating in a valid employment and training program. Employment training was defined as attending college, he said.

Corrigan said one large Michigan school, which she did not identify, had 3,500 students on the program.

Many see using food stamps while attending school as a scam, and former Detroit Mayor Kwame Kilpatrick described it in much that way in his new autobiography.

Kilpatrick, who was recently released from state prison after serving time for violating probation and awaits trial on federal corruption charges, revealed he used food stamps when he attended Florida A&M University in the late 1980s and early 1990s. At the time, his mother was a state representative and his father was a top Wayne County official.

"The food stamp game is an old hook-up in neighborhoods from Detroit to Tallahassee," Kilpatrick said in the book. "If you could get them, especially as a struggling college student, then you did."

Though still commonly known as food stamps, the state's Food Assistance Program now uses debit cards called Bridge Cards to provide assistance to eligible recipients.

Even after the recent removal of 30,000 college students from the food stamp program, close to 2 million Michigan residents — one in five — are on the program, Rooney said.

Not all college students have been kicked off food stamps. For instance, single moms who go to school can still be eligible, as can certain students who work at least 20 hours a week.

Still, critics say Corrigan's changes are too sweeping and each student's case should be examined on its merits.

Nate Smith-Tyge, director of the Michigan State University Student Food Bank, said the stereotypical profile of the middle-class freshman getting dropped off at the new dorm room by Mom and Dad no longer applies.

"A more nuanced approach would have been more humane," Smith-Tyge said. "This sort of carte blanche decision is going to adversely affect people who really needed it. At what cost does it eliminate some abuse?"

Corrigan also detailed steps she is taking to make sure big lottery winners can no longer get food stamps.

As part of its arrangement for federal funding, Michigan in 2000 opted to determine eligibility based only on income and not consider assets, partly because the program is easier to administer that way, Rooney said.

Starting Oct. 1, assets will also be considered in determining eligibility for new applicants, he said. The assets of existing food stamp recipients will also be examined as their cases are re-evaluated every six months.

I like the pick of former head of the Club for Growth Sen. Pat Toomey (R-PA) to this committee. A focus on growth will be necessary to move forward out of the current stalemate. All 6 Republicans picked have signed no tax increase pledges. Rob Portman also seems particularly in tune with tax reform which is potentially the fastest way to add revenue into the mix.

On the D side, Max Baucus might be the most possible to persuade of the D's because the divided state of Montana is not exactly San Francisco or New York for politics. One lesson from in his last reelection could be that needing 91% of your campaign money to come from out of state is something that conceivably could backfire. Baucus voted for the 2001 tax cuts and in 2008 for repealing the estate tax.

Thomas Sowell, I respect very much, says budget deal is a bad deal, boxes the GOP into a corner. (Pyrrhic is a 'victory' costly to the point of negating or outweighing expected benefits)

A Pyrrhic ‘Victory’

By Thomas Sowell

In Don Marquis' classic satirical book, "Archy and Mehitabel," Mehitabel the alley cat asks plaintively, "What have I done to deserve all these kittens?"

That seems to be the pained reaction of the Obama administration to the financial woes that led to the downgrading of America's credit rating, for the first time in history.

There are people who see no connection between what they have done and the consequences that follow. But Barack Obama is not likely to be one of them. He is a savvy politician who will undoubtedly be satisfied if enough voters fail to see a connection between what he has done and the consequences that followed.

To a remarkable extent, he has succeeded, with the help of his friends in the media and the Republicans' failure to articulate their case. Polls find more people blaming the Republicans for the financial crisis than are blaming the President.

Why was there a financial crisis in the first place? Because of runaway spending that sent the national debt up against the legal limit. But when all the big spending bills were being rushed through Congress, the Democrats had such an overwhelming majority in both houses of Congress that nothing the Republicans could do made the slightest difference.

Yet polls show that many people today are blaming the Republicans for the country's financial problems. But, by the time Republicans gained control of the House of Representatives, and thus became involved in negotiations over raising the national debt ceiling, the spending which caused that crisis in the first place had already been done — and done by Democrats.

Had the Republicans gone along with President Obama's original request for a "clean" bill — one simply raising the debt ceiling without any provisions about controlling federal spending — would that have spared the country the embarrassment of having its government bonds downgraded by Standard & Poor's credit-rating agency?

To believe that would be to believe that it was the debt ceiling, rather than the runaway spending, that made Standard & Poor's think that we were no longer as good a credit risk for buyers of U.S. government bonds. In other words, to believe that is to believe that a Congressional blank check for continued record spending would have made Standard & Poor's think that we were a better credit risk.

If that is true, then why is Standard & Poor's still warning that it might have to downgrade America's credit rating yet again? Is that because of the national debt ceiling or because of the likelihood of continued runaway spending?

The national debt ceiling is just one of the many false assurances that the government gives the voting public. The national debt ceiling has never actually stopped the spending that causes the national debt to rise to the point where it is getting near that ceiling. The ceiling simply gets raised when that happens.

Just a week before the budget deal was made at the eleventh hour, it looked like the new Republican majority in the House of Representatives had scored a victory by getting the President and the Congressional Democrats to give up the idea of raising the tax rates — and to cut spending instead. But now that the details are coming out, that "victory" looks very temporary, if not illusory.

The price of getting that deal has been having the Republicans agree to sitting on a special bipartisan Congressional committee that will either come to an agreement on spending cuts before Thanksgiving or have the budgets of both the Defense Department and Medicare cut drastically.

Since neither side can afford to be blamed for a disaster like that, this virtually guarantees that the Republicans will have to either go along with whatever new spending and taxing that the Democrats demand or risk losing the 2012 election by sharing the blame for another financial disaster.

In short, the Republicans have now been maneuvered into being held responsible for the spending orgy that Democrats alone had the votes to create. Republicans have been had — and so has the country. The recent, short-lived budget deal turns out to be not even a Pyrrhic victory for the Republicans. It has the earmarks of a Pyrrhic defeat.http://www.jewishworldreview.com/cols/sowell081011.php3

Just to expand slightly on maternity/ paternity leave from the humor on media issues. I have taken 17 years off of full time work to raise just one - everybody's situation is different. Mom bonding with baby is great. Maybe 2 years or 5 years should be the law - and mom's without babies can pay for it?? Dumping the kid at day care full time at 2 days or 91 days is unbelievable to me. No slam on Ms. Kelly, perhaps her husband or the kids grandparents watch and I doubt she is on the air 40 hours a week, who knows. Point is that you can make a federal law to fit her situation, even though she already has it in her contract, then it applies to all women in all states in all industries at all pay levels and all company sizes. Add gender fairness to that and it applies to men too. Then if the employer can't afford to pay people not working, the company closes. You can't pay out what you don't take in. Even if you write the law perfectly and it all makes sense, it is one more mandate on top of thousands of others and it causes less hiring. 3 months off, if that is the magic number, could be the expense of the employee, the choice to not get paid for not working - that is extreme! 18 years off could be paid for with accumulated savings and investments if that was still legal or by having the other spouse work, if half the pay didn't go to the government - for other people's children. A tangled web we weave - there is not a one size fits all solution available, I'm sorry.

General Motors before the bailout was paying healthcare for 10 times more people than actually worked there. 9 out of 10 were on some kind of leave until the cost of healthcare surpassed the cost of all materials in the car, not to mention labor. The what could possibly go wrong question already has. Only big business knows how to jump through all the hoops, take GE with no income tax, but big business is inefficient and losing out to leaner operations everywhere else.

Can't people negotiate for themselves in a free society? Or understand a connection between work and pay?

Years ago in another life I was an employee benefit consultant at a very large consulting firm advising large (50,000+ employees) corporations.

In the real olden days, even basic maternity wasn't covered. Nor was it considered a "disability". Medical complications were covered however. The theorybeing that "maternity" is "Voluntary" and just like nose jobs and breast jobs, if you want it, great, but don't expect insurance or your employer (most large plans are self funded) to pay for it. Simply save your money if you want kids. It should not be a "medical necessity" nor should it be "unexpected".

Times have changed in more ways than one...

How you are "entitled" to pay while out on maternity leave is beyond my understanding.

ps GM's healthcare plan covered so many people and was prohibitively expense because they had contractual retiree benefits to pay. Worse, they did not fund properly, but it's not rocket science. I just wanted it noted that these are not abled bodied employees on "some kind of leave".

By JOHN STEELE GORDON With the national debt certain to be a front-and-center issue in the 2012 campaign, it is important to understand the true measure of its size. That size seems to vary considerably in news reports. Some news organizations use the debt held by the public, others use total debt. Still others report total future liabilities of the federal government, without making clear what, exactly, that means.

So, a few definitions. The total national debt of the United States is the sum of all federal bills, notes and bonds that have been issued by the Treasury and not yet redeemed. The publicly held debt is the sum of the Treasury securities held by individuals, financial institutions and foreign governments. (That's not just the Chinese, by the way. Both Great Britain and Japan are also major holders of U.S. debt, as are many other countries in lesser amounts.)

The intra-governmental debt is the sum of Treasury bonds held by agencies of the federal government, principally the so-called Social Security Trust Fund. The liabilities equal the future pensions, health care, Social Security payments, etc., that are promised under current legislation.

But while the Treasury securities bear the full faith and credit of the United States and any failure to pay the interest or redeem the principal in a timely fashion would be a default, the liabilities are liabilities only so long as current law remains unchanged. If, for instance, Congress were to adjust the formula by which Social Security cost-of-living increases were calculated or change the age of eligibility, future federal liabilities would shrink by trillions of dollars instantly.

Should the intra-governmental debt be counted when discussing the national debt? I think the answer is yes. As the Social Security surplus disappears (it did, at least temporarily, in 2010) as the baby boomers increasingly retire, the Treasury will be asked to redeem more and more of these federal bonds.

Congress will then have three options: cut spending elsewhere, raise taxes, or borrow the money in the bond market, thus converting the intra-governmental debt into publicly held debt. The last of the three options is the only plausible one and so the intra-governmental debt should be counted as though it were publicly held debt, as that's exactly what it will be in the fullness of time.

View Full Image

Corbis .In absolute numbers, the total public debt as of Aug. 11 was $9.924 trillion, and the intra-government debt was $4.666 trillion, for a total of $14.587 trillion. That's well over 300 million times the country's median household income. Stacked as dollar bills, it would reach 920,953 miles high, almost four times as far from Earth as the moon.

But while these numbers are fun to play with, they don't mean much. It's the debt's size relative to gross domestic product that matters, just as personal debts must be measured against a person's income before they can be properly evaluated. The GDP of the United States was $15.003 trillion at the end of the first quarter in 2011. That makes the public debt equal to 66.1% of GDP and the intra-governmental debt 31.1%. Total debt is now 97.2% of GDP and climbing rapidly.

And it's the climbing rapidly part that is worrisome, not the debt's current size relative to GDP. Indeed, the debt has been substantially higher by that measure in earlier times. In 1946, in the immediate aftermath of World War II, it was 129.98% of GDP. But while the debt had increased enormously during the war (it had been 50% of a much smaller GDP in 1940), it did not increase substantially over the next 15 years. It was $269 billion in 1946 and $286 billion in 1960. The American economy grew so much in those years that the debt, while slightly up in absolute terms, was down to only 58% of GDP by 1960.

The debt grew to $370 billion in the next decade, but again economic growth (and, towards the end of the 1960s, inflation) continued to reduce it relative to GDP. In 1970 it was a mere 39%, the lowest it had been since the depths of the Great Depression. And while the debt nearly tripled in the 1970s (to $909 billion), the raging inflation of that decade caused the debt to continue to decline to 34.5% of GDP.

When the Federal Reserve under Paul Volcker broke the back of the 1970s inflation, the debt relative to GDP began to soar. Why? Because Washington continued to increase spending faster than government revenues increased (and revenues increased a whopping 99.4% in the 1980s thanks to the great boom that began in 1983). The debt was 58.15% of GDP in 1990, a full 24 percentage points above its 1980 low. It continued to increase dramatically in the early 1990s, reaching 68.91% of GDP in 1994.

But then a Republican Congress was swept into power that year, the first time the GOP controlled both houses of Congress since 1954, and President Clinton tacked sharply to the center. In the next six years, while revenues increased 61%, federal outlays increased only 22%. The years 1998-2000 actually showed the first surpluses in the federal budget in 30 years. And the debt, relative to GDP, declined between 1994 and 2000 to 57.3% from 68.91%.

That decline ended in 2001 following the collapse of the dot-com bubble and rising unemployment in the resulting recession. By 2003 the debt-to-GDP ratio had risen to 61.7%. Many blame the Bush tax cuts for adversely impacting federal revenues, causing the debt to spiral upwards. But that is just not true. Federal revenues declined by almost 12% in the early years of the decade, but when the tax cuts fully kicked in in 2003, the economy began to grow strongly again and federal revenues increased 44% in the next four years, while unemployment fell to 4.2% from 6.2%. Federal outlays in those four years increased by only 26.4%, and while the debt-to-GDP ratio increased to 64.8% by 2007, that was still well below what it had been in 1994.

Only with the severe recession that officially began in mid-2007 did the debt-to-GDP ratio begin to soar once more. It reached 67.7% by Oct. 1, 2008, near the end of the Bush administration. A year later, under President Obama, it was at 84.4%, a year later still 93.8%. It is headed quickly towards 100% and beyond without fundamental change in how Washington handles the public fisc.

But a president and a Congress committed to reforming Washington's ways face no insuperable problem getting the debt under control. No one expects the United States to pay off its debt (as we did in the administration of Andrew Jackson, the only time a major country has ever paid off its national debt). Even in a best-case scenario, the absolute size of the debt will not get smaller. But if we can summon the necessary political will, we can dramatically affect the measure of the debt burden that matters: the debt-to-GDP ratio.

Just do what we did after World War II, a period that saw its share of recessions and wars, both hot and cold: stop adding to the debt and let the growth of the GDP bring down the ratio.

If the country can experience GDP growth equal to what we had in the 1990s, the debt-to-GDP ratio would drop, in just a decade, to 56.7%, about where it was in 2000.

But that can only happen if the American electorate sends an unequivocal message in November 2012. Voters did exactly that in November 2010. Will they do it again?

Mr. Gordon is the author of numerous books, including "Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt" (Walker, revised edition, 2010).

When Standard & Poor's reduced the nation's credit rating from AAA to AA-plus, the United States suffered the first downgrade to its credit rating ever. S&P took this action despite the plan Congress passed this past week to raise the debt limit.

The downgrade, S&P said, "reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

It's those medium- and long-term debt problems that also worry economics professor Laurence J. Kotlikoff, who served as a senior economist on President Reagan's Council of Economic Advisers. He says the national debt, which the U.S. Treasury has accounted at about $14 trillion, is just the tip of the iceberg.

"We have all these unofficial debts that are massive compared to the official debt," Kotlikoff tells David Greene, guest host of weekends on All Things Considered. "We're focused just on the official debt, so we're trying to balance the wrong books."

"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap," he says. "That's our true indebtedness."

We don't hear more about this enormous number, Kotlikoff says, because politicians have chosen their language carefully to keep most of the problem off the books.

"Why are these guys thinking about balancing the budget?" he says. "They should try and think about our long-term fiscal problems."

According to Kotlikoff, one of the biggest fiscal problems Congress should focus on is America's obligation to make Social Security payments to future generations of the elderly.

"We've got 78 million baby boomers who are poised to collect, in about 15 to 20 years, about $40,000 per person. Multiply 78 million by $40,000 — you're talking about more than $3 trillion a year just to give to a portion of the population," he says. "That's an enormous bill that's overhanging our heads, and Congress isn't focused on it."

By JAMES BOVARD Last Thursday, President Obama proposed new federal jobs and job-training programs for youth and the long-term unemployed. The federal government has experimented with these programs for almost a half century. The record is one of failure and scandal.

In 1962, Congress passed the Manpower Development and Training Act (MDTA) to provide training for workers who lost their jobs due to automation or other technological developments. Two years later, the General Accounting Office (GAO) discovered that any trainee in this program who held a job for a single day was counted as "permanently employed"—a statistical charade by the Department of Labor to camouflage its lack of results. A decade after MDTA's inception, GAO reported that it was failing to teach valuable job skills or place trainees in private jobs and was marred by an "overriding concern with filling available slots for a particular program," regardless of what trainees actually needed.

Congress responded in 1973 by enacting the Comprehensive Employment and Training Act (CETA). The preface to the new law noted that "it has been impossible to develop rational priorities" in job training. So instead of setting priorities, CETA spent vastly more money, especially on job creation. Notorious examples reported in the press in those years included paying to build an artificial rock for rock climbers, providing nude sculpture classes (where, as the Pharos-Tribune of Logansport, Ind., explained, "aspiring artists pawed each others bodies to recognize that they had 'both male and female characteristics'"), and conducting door-to-door food-stamp recruiting campaigns.

Between 1961 and 1980, the feds spent tens of billions on federal job-training and employment programs. To what effect? A 1979 Washington Post investigation concluded, "Incredibly, the government has kept no meaningful statistics on the effectiveness of these programs—making the past 15 years' effort almost worthless in terms of learning what works." CETA hirees were often assigned to do whatever benefited the government agency or nonprofit that put them on the payroll, with no concern for the trainees' development. An Urban Institute study of the mid-1980s concluded that participation in CETA programs resulted in "significant earnings losses for young men of all races and no significant effects for young women."

After CETA became a laughingstock, Congress replaced it in 1982 with the Job Training Partnership Act. JTPA spent lavishly—to expand an Indiana circus museum, teach Washington taxi drivers to smile, provide foreign junkets for state and local politicians, and bankroll business relocations. According to the Labor Department's inspector general, young trainees were twice as likely to rely on food stamps after JTPA involvement than before since the "training" often included instructions on applying for an array of government benefits.

Enlarge Image

CloseAssociated Press

President Obama touts his jobs training proposals in Virginia, June 8..For years the Labor Department scorned the mandate in the 1982 legislation to speedily and thoroughly evaluate whether the programs actually benefitted trainees. Finally, in 1993, it released a study that showed participation in JTPA "actually reduced the earnings of male out-of-school youths." Young males enrolled in JTPA programs had 10% lower earnings than a control group that never participated.

The Workforce Investment Act (WIA) replaced JTPA in 1998. Congress required a thorough evaluation of the law's impact on trainees by 2005. At last report, the Labor Department is promising it will be completed by 2015.

In his speech to Congress, Mr. Obama called for funding hundreds of thousands of summer jobs for teens, which he labeled "investing in low-income youth and adults." Yet such programs have been blighting work ethics for decades.

The GAO warned in 1969 that many teens in federal summer jobs programs "regressed in their conception of what should reasonably be required in return for wages paid." A decade later, it reported that most urban teens "were exposed to a worksite where good work habits were not learned or reinforced." And in 1985, a National Academy of Science study found that government jobs and training programs isolated disadvantaged youth, thus making it harder for them to fit into the real job market.

Mr. Obama also wants a new federal initiative to be based on Georgia Work$, which the president describes as a program in which "people who collect unemployment insurance participate in temporary work as a way to build their skills while they look for a permanent job." But Georgia Work$ has produced far more headlines than jobs—fewer than 200 this year, according to a recent article in Politico.

Begun in 2003, Georgia Work$ gives people a chance to "train" at an employer for eight weeks. They receive no salary but continue collecting unemployment compensation and as well as a $240 weekly stipend from the state of Georgia. Last year, the stipend was increased to $600 a week and anyone who said they needed a job was allowed to participate. After costs exploded, Georgia Work$ was scaled back early this year.

Mark Butler, Georgia's current labor commissioner, stated that the program suffered from a "lack of oversight" before he took over in January. At last report, only 14% of trainees were hired by employers—a success rate akin to other unemployed Georgians who do not participate in the program.

Earlier this year, the Government Accountability Office reported that there were 47 different federal employment and training programs, costing taxpayers $18 billion a year. There is massive overlap and duplication, and few programs seriously evaluate their impact on trainees.

If federal job training efforts worked, Congress would not have thrown out the programs it has created every decade or so and enacted new ones. In reality, government training has always been driven by bureaucratic convenience, or politicians' re-election considerations. There is no reason to believe the latest round of proposals will be any different.

Mr. Bovard, the author of "Attention Deficit Democracy" (Palgrave, 2006), is working on a memoir.

Great news: Green-jobs subsidies created 1 job for every $5.44 million spent

posted at 10:45 am on September 15, 2011 by Ed Morrissey

Today’s Washington Post acknowledges what everyone already knows, and what Spain learned the hard way as well — green-jobs subsidies are sinkholes. When Barack Obama loaded his 2009 Porkulus with nearly $40 billion in subsidies to the green-tech industry, he promised that it would produce an explosion of jobs in a new, green US economy, starting with 65,000 directly created from his largesse. With half of the money gone, how many jobs has Obama’s investment created?

A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.

The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies. …

Obama’s efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-­energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.

That may be the understatement of the year. Even with Obama’s initial promise of 65,000 jobs created (or “saved,” which makes zero sense in this context), that would still come to $593,846 per job, which is hardly an efficient use of capital. If a private-sector business had that kind of capital, it could easily create five jobs from that amount with $100,000 in compensation each, with enough left over for a substantial profit margin.

But the actual results in this case are much worse. With $19.3 billion spent on these programs, the cost per actual job created comes to $5.44 million. That kind of capital could launch entire new businesses, let alone multiple jobs. Any company that ate through $5.44 million to create a job would shortly become a former company … kind of like Solyndra, where $535 million disappeared and took 1,000 jobs along with it.

Inefficiency isn’t the only problem with this model, either. Taxpayers will have to pay off the bonds created to give away this cash, which means the cost won’t just be the $5.44 million, but also the interest we have to pay on each $5.44 million over the next ten years or so. We also have to count the opportunity costs as well. Had we not borrowed this money to feed Obama’s green-jobs-explosion delusions, taxpayers in the future would have that capital to invest, expand and create businesses, and create jobs that make far more efficient use of the capital than $5.44 million per worker. We have not only failed in the present, we have set ourselves up for failure in the future as American capital has to get redirected into paying off the debt Obama hung on us for his green-jobs subsidy program.

That’s Obamanomics in a nutshell. Which is, by the way, exactly where it belongs.

"No pecuniary consideration is more urgent, than the regular redemption and discharge of the public debt: on none can delay be more injurious, or an economy of time more valuable." --George Washington, Message to the House of Representatives, 1793

"There is not a more important and fundamental principle in legislation, than that the ways and means ought always to face the public engagements; that our appropriations should ever go hand in hand with our promises. To say that the United States should be answerable for twenty-five millions of dollars without knowing whether the ways and means can be provided, and without knowing whether those who are to succeed us will think with us on the subject, would be rash and unjustifiable." --James Madison, Speech in Congress, 1790

"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." --Thomas Jefferson, letter to John Taylor, 1816

As important as the substance is to see from where this is coming, one of the Senate's most left leaning Republicans. I disagree with her on policy; it is not a one year break from governmental stupidity and excess that we need. How about a structural reform requiring that any regulation large enough in scope to cripple the economy of a state or the nation would have to go through the House and Senate in order to become federal law.

The Economy Needs a Regulation Time-OutWhy send jobs overseas by creating more rules for American business?

By SUSAN COLLINS

Last year, the Food and Drug Administration issued a warning to a company that sells packaged walnuts. Believe it or not, the federal government claimed the walnuts were being marketed as a drug. So Washington ordered the company to stop telling consumers about the health benefits of walnuts.

Meanwhile, the Environmental Protection Agency proposed a new rule on fossil-fuel emissions from boilers that—by the EPA's own admission—would cost the private sector billions of dollars and thousands of jobs. The owner of a small business in Maine told me the proposed rule would require him to scrap a new, $300,000 wood waste boiler he recently installed.

No wonder America's employers dread what is coming next out of Washington. Our country cannot afford regulations run amok at a time when no net new jobs are created and unemployment remains above 9%. But at least we're safe from health claims about walnuts.

America's overregulation problem is only getting worse. Right now, federal agencies are at work on more than 4,200 rules, 845 of which affect small businesses, the engine of job creation in our country. More than 100 are major rules, with an economic impact of more than $100 million each.

No business owner I know questions the legitimate role of limited government in protecting our health and safety. Too often, however, our small businesses are buried under a mountain of paperwork that drives up costs, prevents the hiring of workers, and impedes economic growth.

Business owners are reluctant to create jobs today when they're going to need to pay more tomorrow to comply with onerous new regulations. That's what employers mean when they say that uncertainty generated by Washington is a big wet blanket on our economy.

I have asked employers in my state what it would take to help them add jobs. No matter their business or the size of their work force, they tell me that Washington must stop imposing crushing new regulations.

America needs a "time-out" from the regulations that discourage job creation and hurt our economy. I have introduced legislation to impose a one-year moratorium on any "significant" new rules that would have an adverse impact on jobs, the economy, or America's international competitiveness. A one-year moratorium on such regulations is a common-sense solution that would help create jobs.

Under my bill, certain rules would be exempt from the moratorium: those that are needed in emergencies, such as to respond to imminent threats to public health or safety, and those affecting crime, the military and foreign affairs. My bill also excludes rules that would reduce the regulatory burden on the private sector. Unfortunately, those rules that actually reduce regulatory burdens and promote jobs are few and far between.

That EPA rule on boilers is a good example of why we need a regulatory time-out. According to a recent study by the American Forest & Paper Association, if the rule went into effect as written it could, along with other pending regulations, cause 36 American pulp and paper mills to close. That would put more than 20,000 Americans out of work—18% of that industry's work force.

Once those mills close, the businesses that supply them also would be forced to lay off workers. Estimates are that nearly 90,000 Americans would lose their jobs, and wages would drop by $4 billion—just because of over-regulation.

But even that is not the end of the story. People and businesses would still need paper. Where do you think we would get it? We'd be strengthening the economies of other countries like China, India and Brazil, while weakening our own.

American businesses need pro-growth economic policies that will end the uncertainty and kick-start hiring and investment. American workers need policies that will get them off the sidelines and back on the job.

In sports, time-outs are called to give athletes a chance to catch their breaths and make better decisions about the next play. American workers and businesses are the athletes in a global competition that we must win. They need a time-out from excessive regulation so that America can get back to work.

The Environmental Protection Agency claims that the critics of its campaign to remake U.S. electricity are partisans, but it turns out that they include other regulators and even some in the Obama Administration. In particular, a trove of documents uncovered by Congressional investigators reveals that these internal critics think the EPA is undermining the security and reliability of the U.S. electric power supply.

With its unprecedented wave of rules, the EPA is abusing traditional air-quality laws to force a large share of the coal-fired fleet to shut down. Amid these sacrifices on the anticarbon altar, Alaska Republican Lisa Murkowski and several House committees have been asking, well, what happens after as much as 8% of U.S. generating capacity is taken off the grid?

A special focus of their inquiry has been the Federal Energy Regulatory Commission, or FERC, which since 2005 has been charged with ensuring that the (compact florescent) lights stay on. That 8% figure comes from FERC itself in a confidential 2010 assessment of the EPA's regulatory bender—or about 81 gigawatts that FERC's Office of Electric Reliability estimated is "very likely" or "likely" to enter involuntary retirement over the next several years. FERC disclosed the estimate in August in response to Senator Murkowski's questions, along with a slew of memos and emails.

FERC Chairman Jon Wellinghoff, a Democrat, has since disavowed the study as nothing more than back-of-the-envelope scribblings that are now "irrelevant," as he told a recent House hearing. OK, but then could FERC come up with a relevant number? Since he made the study public, Mr. Wellinghoff has disowned responsibility for scrutinizing the EPA rules and now says that FERC will only protect electric reliability ex post facto once the rules are permanent, somehow.

Enlarge Image

CloseAssociated Press

Sen. Lisa Murkowski.This abdication is all the more striking because the documents show that EPA's blandishments about reliability can't be trusted. In its initial 2010 analysis—a rigorous document—FERC notes in a "next steps" section that the reliability office and industry must "assess the reliability and adequacy impacts of retirement of at risk units." In part, this was because the office believed the EPA analyses to be deficient. One undated memo specifies multiple weaknesses in EPA reliability modelling.

However much power is lost, whether 81 gigawatts or something else, the electric grid is highly local. Even subtracting a small plant could have much larger effects for regions, such as blackouts. The older and less efficient coal plants that are slated for closure are often the crucial nodes that connect the hubs and spokes of the grid. If these "sensitive" interconnections are taken out, as the memo puts it, the power system becomes less stable, harder to manage and may not be able to meet peak-load demand or withstand unexpected disturbances.

When large swaths of Arizona, New Mexico and parts of southern California including San Diego went dark this month, preliminary reports blamed it on a Homer Simpson who flipped the wrong switch. But the incident shows that even minor mistakes or degraded systems can ramify throughout the grid. The EPA scanted these technical, regional issues when writing the rules, even though another "summary of interagency working comments" within the Administration explicitly told the EPA that reliability needed "more discussion."

And according to the FERC minutes of a 2010 meeting between its reliability office and the EPA, EPA staffers waved off those concerns. "The EPA concluded the discussion by stating that it felt the Clean Air Transport Rule and Mercury MACT rule"—two of the most destructive new regulations—"were the highest priority given that these regulations were more finalized." In other words, the agency's green political goals are more important than the real-world outcomes, never mind the danger.

For our part, we've opposed this "highest priority" because the rules are written in a way that maximizes the economic costs, with terrible effects on growth, hiring, investment and consumer prices. And well, well: More than a few people in the Administration seem to agree.

The interagency memo explains that the EPA used its "discretion" to structure one rule so that it is more "stringent" than it needs to be. The agency could achieve the same environmental benefits with "substantial" cost-savings, which "would be far more preferable to the proposed approach," says the memo. It sensibly adds that, "The current economic climate dictates a balancing of economic and environmental interests."

Under pressure from Democrats and the EPA to disavow his own agency's analysis, Mr. Wellinghoff now says that FERC favors only a "safety valve" that would give it the authority to overrule the EPA on a case-by-case basis if its regulations might lead to blackouts. But even this is a tacit admission of EPA's overkill. You don't need a safety valve if there isn't a threat to safety.

The best option would be for the EPA to write less destructive rules that don't jeopardize reliability in the first place. Failing that, we should at least know the risks before it is too late. In a letter to Mr. Wellingoff last week, Mrs. Murkowski simply asks that FERC undertake some kind of study of the EPA's agenda in line with its statutory obligations and the warnings of its own experts. If FERC won't do it, someone else should.

"Last week, the Federal Emergency Management Agency was telling everyone who would listen that they needed billions to replenish their disaster relief fund right now, or else they would run out of money today. ... Then, suddenly, FEMA told Senate Democrats that all of their previous warnings were overblown. The agency was able to recover $40 billion from ongoing long-term projects, and instead of being broke, they actually had $114 million in the bank, just enough to get them into the next fiscal year. Which is convenient, because that allows them access to all of next year's budgeted disaster relief spending. Since there is now no need for unbudgeted disaster relief spending this year, there is now no need for spending offsets. ... If anybody ever wants to know why conservatives never believed Secretary Tim Geithner when he said the government was going to run out of money this August, this $114 million FEMA find is a great example why." --Washington Examiner columnist Conn Carroll

"If European governments and the U.S. Congress ceased the practice of giving people what they have not earned, budgets would be more than balanced. For government to guarantee a person a right to goods and services he has not earned, it must diminish someone else's right to what he has earned, simply because governments have no resources of their very own. ... It turns out that if Congress taxed away our entire $14 trillion 2011 GDP and put it in the bank, it would just barely cover Social Security and Medicare liabilities. That observation suggests that we can't tax our way out of our fiscal mess. In order to avoid permanent stagnation or total economic collapse, governments must start the process of reducing welfare spending. I wouldn't recommend cold turkey for a heroin addict, neither would I recommend cold turkey for all those people who have been addicted and made dependent upon government handouts. We must find a compassionate way to wean people off government." --economist Walter E. Williams

First, the Walter WIlliams quote above in the thread is right on the money.----------Refusing to use the term crony c*pitalism anymore for what is not at all capitalism, this topic could always go under corruption, but at its heart it is just another failed government program doing enormous damage to out economic foundations. At its core it violates the freedom of equal protection under the law when you all-knowing, all-powerful government picks your winners and losers for you.

Yesterday the Department of Energy approved $1 billion in new loan guarantees to “green energy” companies. Drudge is headlining the fact that, as reported by Mark Hemingway in the Weekly Standard, most of that amount–$737 million–is going to SolarReserve LLC for a solar-thermal project in Nevada. SolarReserve’s “investment partners”–I take it that means owners–include the Pacific Corporate Group’s Clean Energy and Technology Fund. One of Pacific Corporate Group’s principals is Nancy Pelosi’s brother-in-law, Ronald Pelosi. Another of SolarReserve’s owners is Argonaut Private Equity, whose managing director, Steve Mitchell, is on Solyndra’s board of directors.

My guess is that government underwriting of SolarReserve’s project is a horrible idea. But suppose it isn’t: who is going to believe that the Obama administration wasn’t influenced by Pelosi’s brother-in-law’s involvement in the project? Likewise, who will believe that Democratic donor George Kaiser’s involvement in Solyndra was irrelevant to the government’s misbegotten support for that company? Hemingway writes that “t’s increasingly hard to tell the government’s green jobs subsidies apart from the Democrats’ friends and family rewards program.” That’s true, and whether “green energy” corruption is real or only perceived, it breeds cynicism and erodes trust in government–which, not coincidentally, is at an all-time low.

But the problem goes deeper still. When the federal government gets into the business of picking winners and losers among private businesses, it is easy to identify the winners–they are companies like Solyndra and SolarReserve that get government money or loan guaranties. But what about the losers? A much larger number of companies who don’t get federal money are in that category, and how will we ever know who they are, let alone know whether they were losers because someone involved in them is a Republican donor?

There is no such thing as “good” crony capitalism. Once the government gets into the business of favoring some private businesses over others, the results can only be bad, and not only, or even primarily, because of the loans that wind up costing the taxpayers.

When critics warned about rising defaults on government-backed student loans two years ago, the question was how quickly taxpayers would feel the pain. The U.S. Department of Education provided part of the answer this month when it reported that the default rate for fiscal 2009 surged to 8.8%, up from 7% in 2008.

This rising default rate doesn't even tell the whole story. The government allows various "income contingent" and "income-based" repayment options, so the statistics don't count kids who were given permission to pay less than they owed. Taxpayers shouldn't expect relief any time soon. Thanks to policy changes in recent years and fraudulent government accounting, the pain could be excruciating.

Readers who followed the Congressional birth of ObamaCare in 2010 may recall that student lending was the other industry takeover that came along for the legislative ride. Private lenders used to originate federally guaranteed loans, but the new law required all such loans to come directly from the feds. Combined with earlier changes that discouraged private loans sold without a federal guarantee, the result is a market dominated by Washington.

The 2010 changes did not happen simply because President Obama and legislators like Rep. George Miller and Sen. Tom Harkin distrust profit-making enterprises. The student-loan takeover also advanced the mirage that ObamaCare would save money.

Enlarge Image

CloseAssociated Press .Thanks to only-in-Washington accounting, making the Department of Education the principal banker to America's college students created a "savings" of $68 billion over 11 years, certified by the Congressional Budget Office. Even CBO Director Douglas Elmendorf admitted that this estimate was bogus because CBO was forced to use federal rules that ignored the true cost of defaults. But Mr. Miller had earlier laid the groundwork for this fraud by killing amendments in the House that would have required honest accounting and an audit.

Armed in 2010 with their CBO-certified "savings," Democrats decided they could finance a portion of ObamaCare, as well as an expansion of Pell grants. But as Bernie Madoff could have told them, frauds break down when enough people show up asking for their money. That's happening already, judging by recent action in the Senate Appropriations Committee, where lawmakers apparently realize that the federal takeover isn't going to deliver the promised riches.

To preserve Team Obama's priority of maintaining a maximum Pell grant of $5,550 per year and doubling the total annual funding to $36 billion since President Obama took office, Democrats recently decided to make student-loan borrowers pay interest on their loans for their first six months out of college. Washington used to give the youngsters an interest-free grace period. Taxpayers might cheer this change if the money wasn't simply being transferred to another form of education subsidy. But it seems almost certain to raise default rates as it puts recent grads under increased financial pressure.

None of these programs has anything to do with making it easier to afford college. Universities have been efficient in pocketing the subsidies by increasing tuition after every expansion of federal support. That's why education is a rare industry where prices have risen even faster than health-care costs.

This is also the rare market where the recent trend of de-leveraging doesn't apply. An August report from the Federal Reserve Bank of New York found that Americans cut their household debt from a peak of $12.5 trillion in the third quarter of 2008 to a recent $11.4 trillion. Consumers have reduced their debt on houses, cars, credit cards and nearly everything except student loans, where debt has increased 25% in the three years.

Perhaps this is because most federal student loans are made without regard to income, assets or credit history. Much like the federal obsession to finance a home for every American regardless of ability to pay, the obsession to finance higher education for every high school student ignores inconvenient facts. These include the certainty that some of these kids will take jobs that don't require college degrees and may not support timely repayment.

For this school year, even the loans that pay on time aren't necessarily winners for the taxpayer. That's because of a 2007 law that Mr. Miller and Nancy Pelosi pushed through Congress—and George W. Bush signed—that cut interest rates on many federally backed student loans. Stafford loans, the most common type, have been available since July at a fixed rate of 3.4%, barely above the historically low rates at which the Treasury is currently borrowing for the long term. The student loan rates are scheduled to rise back to 6.8% next year. But if our spendthrift government ends up borrowing money above 7% and lending it to kids at 6.8%, taxpayers will suffer even before the youngsters go delinquent.

Efforts to clean up this debacle are stirring on Capitol Hill, with House Republicans moving to limit Pell grants to students who have a high school diploma or GED. Oklahoma Sen. Tom Coburn would go further and have government leave the business of subsidizing the education industry via student loans and let private lenders finance college. That may be too radical at the moment, but it won't be if taxpayers ever figure out how much subsidized loans will cost them.

This piece drifts across other topics, especially energy, but is first and foremost IMO about our misguided government picking winners(losers) and losers in any industry. Though he is pointing out truths that should be self evident, perhaps you should disregard because author Walter Russell Mead who teaches American foreign policy at Yale has a blog. Also he is biased, an admitted Democrat who voted for Obama.

My question is about the government program, why are we doing this? Forget that it will fail for certain, Why do they get billions taken from other people doing honest work including future generations? Why can they build plants on public land on the rest of us can't? These programs are morally and constitutionally wrong.-------------http://blogs.the-american-interest.com/wrm/2011/10/01/green-energy-industry-staggers/Walter Russell Mead's BlogOctober 1, 2011

As the Energy Department hustled to get another $4.7 billion in loan guarantees for green tech companies out the door before time ran out and the program ended last week, yet another solar panel manufacturer was wilting in the sun, and the green jobs scam was looking more threadbare than ever. Says the WSJ:

Solar-power equipment manufacturer Stirling Energy Systems Inc. has filed for bankruptcy, adding to a wave of troubles in the solar industry amid soft demand, falling prices and difficulty raising money. [… ] Both [of the company’s plants] were sited on public land in California and obtained fast-track construction permits from the Obama administration.

The filing is the latest in a string of U.S. solar company bankruptcies, as soft global demand for solar power, falling prices and a glut of solar panels from Asia have hammered manufacturers.

Surprise, surprise: the American “green energy” industry faces much the same problems as everyone else in this economy. Solar firms still have to compete with Chinese labor (and massive Chinese government subsidies further enhanced by cheap Chinese currency).

But there’s another factor behind the failure of so many Obama administration initiatives in this field. Because alternative energy generation is expensive and inefficient, it requires some combination of subsidies, high energy prices and forced purchases to make these investments pay off.

The Solyndra guarantee and related programs were all developed back in the heady early days of the Obama administrations when delusional greens thought their global agenda was on the verge of being realized. Cap and trade and other aggressive energy policies would artificially jack up energy prices in the US to the point where demand for solar and other alternative energy would grow. The global carbon treaty would provide a permanent source of demand for green energy.

The political assumptions underlying the green investment boomlet turned out to be false. There will be no global carbon regime for the foreseeable future; there will be no cap and trade and no aggressive federal programs to raise energy prices during the deepest recession since World War Two.

Perhaps even worse from the green point of view, a cascade of discoveries and technological advances has dramatically increased the supplies of oil and gas in the western hemisphere — including huge new domestic energy supplies in places like Pennsylvania, Ohio and upstate New York. These discoveries are devastating to the politics of the environmental movement.

There will be the usual NIMBY-motivated opposition (some of it justified) to frakking and to oil and gas pipelines, but overall millions more Americans are going to be economically tied to domestic energy production and they will not want their congressional representatives voting against the industry on which their paychecks depend. Nor will they support presidential candidates who promise to eliminate their jobs. It will not just be the people who work in the extraction business who feel this way. Those who supply the industry, those who operate pipelines, those who sell goods and services to gas and oil workers: they will form a powerful phalanx of pro-oil and gas interests that will reach far beyond Texas.

At the same time, key environmental arguments will be seriously weakened. The western hemisphere looks set to become energy independent for the foreseeable future; the US is moving steadily away from the dependence on Middle Eastern oil that makes many national security experts think green. Importing from Canada just isn’t the same kind of problem as importing from Iraq.

The question of supply and peak oil will also recede; with new technologies and new discoveries coming so quickly, fewer people will feel the need to make large financial sacrifices now in order to prevent huge oil shortage and massive price hikes in the near term.

Increasingly, the climate change argument will be the only argument left to support subsidies for alternative energy generation. That argument has not been enough to make far reaching legal changes in the past when national security and peak oil worries supported it; there is not much to suggest that the climate change forces can win the political battle standing alone.

The collapse of the green political structure (cap and trade plus global carbon treaty) and the transformation of the American fossil fuel supply have dramatically weakened the case for alternative energy. Investors take heed.